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Facebook's Revenues Leaked
eldavojohn writes "Think that Goldman Sachs spent too much on Facebook with the $450 million investment? Well, a very wealthy customer of theirs decided to leak Facebook's financials yesterday after receiving it over lunch: '... during the first nine months of 2010, Facebook generated $1.2 billion in revenue. Net income at the firm was $355 million. The financial statements were not audited and offered little detail about how Facebook generates its revenue, said the source, who did not want to be identified because he had signed a non-disclosure agreement.' Expanding this nine-month period to a year yields $1.6 billion in revenue and under half a billion in income. Given that, should Facebook be valuated at $50 billion?"
Reader frontwave adds news that other social tech companies are hurriedly considering IPOs of their own.
What would be the percentage of "Facebook penetration" amongst the /. users ?
If it's penetration you're after, Craigslist is far superior.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
Of course. Peoples personal information always has a market value.
"Have you ever thought about just turning off the TV, sitting down with your kids, and hitting them?"
Is Facebook a viable long term business model ?
All internet companies are butterflies. Something newer and hipper will come around.
Facebook too will one day go the way of MySpace and LiveJournal.
(And Google will one day go the way of Altavista, Hotbot and ftpsearch.ntnu.no)
Facebook has five hundred million users. Is each user really worth a hundred dollars? Facebook is going public soon. What are the chances that this 'leaked' report is designed to pump up the stock, and therefore Goldman's profit?
Slashdot: news for Apple. Stuff that Apple.
Is Facebook a viable long term business model ?
I have never been using Facebook although I have heard a lot about it. Obviously some people, mostly mainstream from what I can understand, seem to enjoy it a lot.
What would be the percentage of "Facebook penetration" amongst the /. users ?
Among /. users, lower than average because we have a lot of privacy nuts here.
However, among the general population, Facebook is huge. Go on, sign up and see how many of your friends are on there (you can always put fake details in and delete the account afterwards). If you're in an English speaking country and younger than 50, I bet it's more than half. ... and it's a medium that lends itself well to ads etc.
My biggest issue is, penetration is so high already, how much bigger can it grow? How can it monetize the existing user base more, without alienating them? Possibly by "replacing" the internet. I already see things like nightclubs choosing to have a Facebook page *instead* of their own dedicated site. There are lots of people who send each other FB messages instead of using email. Will we see an Amazon-like store hosted inside Facebook -- with a cut going to Facebook on every sale?
The reports fail to disclose that I just deleted my account.
So, I'm just saying, the valuations need to take that into consideration.
The only explanation for the valuation is the belief that Facebook will be more valuable over the long term than it is now. Unless you think Facebook will still be a wise investment in 15 years, the valuation is a little bonkers. In the technology space, this seems to contradict observed experiences -- a decade is a very, very long time.
This is particularly so with something as ephemeral as a community-powered product. Diaspora was a disappointment, true. But do you really think no credible Facebook alternative will come along in ten years? And once that crowd leaves, exactly what is Facebook's value? Some PHP? Server farms? Yeah, ok.
Nah, that's more of a purgatory offense.
Facebook has five hundred million users. Is each user really worth a hundred dollars?
I'm not a businessman but I'm not so sure this is the correct way to think about this.
... but there's no guarantee that Facebook remains the de facto standard that far out. You need to consider future growth.
Everything depends on how much the market is penetrated for social in two ways: users and advertisers. Can they grow that revenue/profit? And if so, to what point? If Zuckerberg sneaks it into China then I think you're looking at a potential to increase that significantly. Facebook hosts its statistics so you can guess if it's got a half billion in revenue yearly at half a billion users and it scales perfectly, that's a dollar per year per user. Can it get up to a billion users? It's probably clear that in the long run as the younger generation matures, that penetration will slowly expand
The other factor, advertisers and game publishers, could also be troublesome. Is this a "Honeymoon Period" for advertisers where they're paying an unsustainable amount to Facebook for the time being just to gain exposure? Could the above assumptions about scaling with userbase actually be false if advertisers aren't willing to spend more than they are now once more users join?
Consider that these numbers put Facebook's Net Profit Margin at almost 30%. That's very high for the industry. They're in the same region as Google and Microsoft but as I stated above can it scale?
One last thing, you seem to think that Facebook's worth is only its users. They are also a large company with almost two thousand employees and are building infrastructure. Include that on your assets sheet.
Facebook is going public soon. What are the chances that this 'leaked' report is designed to pump up the stock, and therefore Goldman's profit?
I think the SEC would come down pretty hard on GS if they did that -- they have before for less. Misleading investors is very serious.
My work here is dung.
You're not the customer. You're the product.
Is Facebook a viable long term business model ?
All internet companies are butterflies. Something newer and hipper will come around. Facebook too will one day go the way of MySpace and LiveJournal.
(And Google will one day go the way of Altavista, Hotbot and ftpsearch.ntnu.no)
Normally I would agree, but I don't think so in this case. Facebook has done one thing well, and it's appealed to the masses across all demographics. MySpace was too quirky, convoluted, etc. Facebook has kept things relatively simple. As long as they don't result in mass bank fraud due to users' personal information being listed, they have a pretty safe model.
Facebook also does not appear to be stagnating the way MySpace did when it thought it was the only option. They have a pretty good partnership with Zynga that supplies gimmicky, addictive games for Joe Public and they continue to add new "features." Whether those features are beneficial to the end-user or Facebook itself, it still comes across as innovating.
I think companies have started to wisen-up after the dot-com burst. Investors are also going to be prone to stay with companies that have shown some resilience in the downed economy.
[Citation Needed]
-1 overrated isn't the same thing as "I disagree".
Is Facebook a viable long term business model ?
If you ask me, social networks become more viable the longer the exist in a successful form, and the more people adopt it. FB would've been useless to me if only a fifth of my friends and relatives used it, but now even my mom and aunt use it. Suddenly it becomes a *very* strongly founded network. A new social network pops up? Well, ask Google how well Google Buzz went, and that was Google being the challenger. Why switch? We're already on one. We and 500 million others.
Yes, Facebook is a viable long term business model, and it becomes more viable by the day.
I'm not joking when I'm saying that to many, Facebook is already their central website, and the rest of the sites on the web mere "sidetracks".
Beware: In C++, your friends can see your privates!
a rocksolid stable company like Walmart pays 2.24% dividend out of profits ($4.5 Billion on a valuation of $200 billion). A less stable company like AT&T pays 6% ($10 billion OUT OF PROFITS on a marketcap of $170 billion). Growth companies have the same sort of profits or larger, but they tend to reinvest all of the profits in expansion so they don't pay dividends.
If you think Facebook has as solid a future as AT&T, then at $50 Billion valuation Facebook would need to see $3 billion in excess PROFIT. So, they are tremendously overvalued by today's alleged revenues of $0.5 billion. The only outstanding question is whether they can grow to much greater than $3 billion profits in the next year. I don't see that happening, you are free to smoke whatever crack you can find.
There was an interesting piece on MIT's Technology Review site about how Facebook is doing something that VeriSign, Microsoft, Yahoo, and Google have all tried and mostly fail at, which is providing a single id and single log in for the internet. There are, distressingly, a whole bunch of sites that have jumped on the Facebook Connect service as a way to sign in to their website for, for example, posting comments. And, of course, there's also all those annoying "Like" buttons that keep popping up everywhere. So long-term? I don't know, but I don't think we are getting rid of Facebook any time soon.
Fully disclosure: I briefly played around with Facebook a couple of years ago, but quit after a couple of months after getting sick of seeing spam about which Sex in the City character somebody I barely knew back in high-school is supposed to be. Or how they scored in a "know your one-hit wonders of the '80s" quiz.
How silly! EVERY company loses favor. Styles change, customs change, companies bet on the wrong horse or stay the course and stagnate.
EVERY company loses favor sooner or later. Facebook is not going to be the first immortal company.
Infuriate left and right
How much of the third world would place Facebook ahead of not being raped or forced to starve to death?
Dude, have you seen Facebook's new profile page?
Ceci n'est pas un sig.
They have 500 million viewers, yet they ONLY make $1.6 billion from them?
Conde Naste makes $4 billion a year from just a few million viewers.
There are some fundamental problems with Facebook that would prevent major-brand advertisements from purchasing ads there, namely, that it's a viewer-driven site - content comes from the viewers, which is a big no-no among advertisers.
Why would a major advertiser, like Calvin Klein, place their high-end ad right next to some picture of a college kids barf? They would much rather have their ads placed next to a picture of Lara Stone.
THIS is why Facebook only pulls in a few cents CPM, whereas an ad in Vogue goes for $150 CPM.
The more democratic you get, the less interesting you are to advertisers.
Facebook may be maxing out on number of customers. They have 500 million accounts. Tencent's QZone, in China, is slightly larger; Facebook isn't going to take over China.
If they're near max growth, they have to be priced as an ongoing concern, and should have a P/E around 15 to 20. (Microsoft's P/E is around 12, Apple is around 21, Google is around 25.) So if net income is $355 million, market cap should be around $7 billion.
$50 billion, no way.
Read Matt Taibbi's blog post over at Rolling Stone. They are using what's called a "Special Purpose Vehicle." Basically, the SPV invests in Facebook, and Goldman's hand-picked clients invest in the SPV. You don't have to disclose financials if you have less than 500 investors, and the SPV only counts as one.
Ceci n'est pas un sig.
I prefer to say, "the investor made a revision to their privacy policy."
Kings 9:21:
And he who shall visit a prostitute found via craigslist shall spend eternity in purgatory.
At least, that's what my version of the bible has.
"Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
Ordinarily, (and according to all the market analysts at the WSJ and elsewhere), a "valuation" is performed by market-driven factors when an equity interest is purchased in an arms-length transaction. The calculation of valuation is easy: If you buy 1% of the company for X, then the company must be worth 100X, right? Here, Goldman bought 0.9% of FB for $450M, creating a valuation of $450M/0.009 = $50B.
Wrong. It's not an arms-length transaction. Goldman is getting a lot of value out of the deal aside from the value it expects to earn purely as a shareholder.
(1) Goldman is setting itself up to be the underwriter for Facebook's IPO. That's worth a lot.
(2) Goldman is getting a lot of press, advertising, good will, bragging rights, etc. That's worth a lot.
(3) Goldman may get other business opportunities associated with Facebook such as contacts, financial services for FB & related companies & executives, a potential talent pool for ppl looking to jump ship (esp. at executive level?), etc.
If Goldman put a value of $441 million on all those "extras", the intrinsic amount paid for the 0.9% stake in FB is only $9M, putting Goldman's valuation of FB at a measly $1B.
Looks a lot different now, doesn't it? That Goldman's "internal" valuation of FB must be so different from the "external" market valuation just goes to show you how ignorant most financial types (and reporters) are.
The reported valuation (or any valuation based on an investment) is only accurate if you know the full extent of what was purchased.
Wait what? I know a lot of teens who are on facebook, and who's parents are on facebook... and... the teens don't mind using facebook...
It's whose, you reprobate!
Sorry. It's my CDO acting up. Sorta like OCD, but it's alphabetical - as it should be.
"All these years believing you're the signified monkey, only to find out you're just a big hunk of nobody cares."